North Korea "will withdraw all its employees from the zone", Kim Yang-gon, a senior ruling party official, said in a statement carried by the official Korean Central News Agency.

Advertisement

At the same time, Pyongyang "will temporarily suspend the operations in the zone and examine the issue of whether it will allow its existence or close it", Kim added.

Kaesong was built in 2004 as a rare symbol of cross-border economic cooperation.

Neither side has allowed previous crises to significantly affect the complex, a crucial hard currency source for the impoverished North and seen as a bellwether for stability on the Korean peninsula.

But Pyongyang has blocked South Korean access to Kaesong since last Wednesday, forcing 13 of the 123 South Korean firms operating to halt production.

Monday's announcement came just hours after South Korean Finance Minister Hyun Oh-Seok denounced the access ban as "ridiculous".

Pyongyang had threatened to withdraw its 53,000 workers last week after the South's defence minister said there was a "military" contingency plan in place to ensure the safety of South Koreans in the complex.

"How the situation will develop in the days ahead will entirely depend on the attitude of the South Korean authorities," said Kim, who blamed the pull-out on "military warmongers" who had affronted the North's "dignity."

The Korean peninsula has been locked in a cycle of escalating military tensions since the North's third nuclear test in February which drew toughened UN sanctions.

The South's Defence Ministry said Monday that activity detected at the North's Punggye-ri atomic test site was "routine" and should not be interpreted as final preparation for another detonation.

"There is no indication that a nuclear test is imminent," ministry spokesman Kim Min-Seok said, while adding that the North consistently maintained Punggye-ri at a state of test-readiness.

The daily JoongAng Ilbo had reported Monday intelligence reports of stepped-up activity at the site that might point to an upcoming test.

The South's Unification Minister had appeared to confirm the report, but then insisted his remarks had been misinterpreted.

North Korea's bellicose rhetoric has reached fever pitch in recent weeks, with near-daily threats of attacks on US military bases and South Korea.